Office of the Historian

893.70/40: Telegram

The Consul General at Shanghai (Lockhart) to the Secretary of State

Shanghai, September 13, 1938—5 p.m.
[Received September 14—6 a.m.]

1218. My despatches numbers 1412, May 6; 1432, May 16; and 1642, September 185 and my telegram 1074, August 6, 6 p.m. and Department’s 500, August 23, 4 p.m., regarding International Cable Office at Shanghai.

1.
The pertinent part of Department’s 500, August 23, 4 p.m. was communicated to Commercial Pacific Cable Company. The Company now informs me that further demands have been received by it and other concerned companies from the Secretary of the Special Service Section of the Japanese, H. Higashi. These demands briefly are as follows:
(1)
Japanese objections are recorded to the debiting of Marconi Loan installments on the balance sheets for December 1937, and January and February 1938, the latter being the last balance sheet submitted,
(2)
the balances already deposited in the suspense accounts with the Yokohama Specie Bank to be transferred to a deposit account in the same bank in the name of Mr. H. Higashi,
(3)
future balances due, as for March this year and subsequent months, to be paid to the same account,
(4)
any future deductions from monthly balance sheets must be agreed to beforehand by the Japanese military authorities,
(5)
further particulars to be supplied regarding debit items on balance sheets or December 1937 and January 1938 in respect of monies due to Cables and Wireless Limited for April–October 1937.
2.
The companies’ position is that the debiting of the Marconi Loan installments on the balance sheets for December, January and February was carried out at the request of the Chinese Telegraph Administration after the divisional manager of the Eastern Extension Telegraph Company had discussed the matter with the Japanese consular officials and gained the impression that they would have no objection. However, objection was later interposed by the companies feeling it is extremely unfair to them to demand that this transaction be reopened. [Page 471] The cable companies take the position that they cannot comply with the Japanese request and the Pacific Company inquires whether it can rely upon the support of this Consulate General in upholding its stand.
3.
As regards item 2, the companies feel that any compliance with this request would mean their losing all hold on the funds hitherto held in suspense, thus further embarrassing their position vis-à-vis the Chinese Telegraph Administration, who claim ownership of the monies impounded. The companies consider that the monies should remain in the present special suspended account until the situation [is] finally cleared up. The companies inquire whether they shall endeavor to maintain this stand and if so what support the various diplomatic and consular officers could extend them. As regards item 3, the companies’ stand on this request will be governed by the answer to item 2. As regards items 4 and 5, the companies perceive no objection to compliance.
4.
I have consulted my British and Danish colleagues today and they both state that they are awaiting replies from respective governments in connection with developments described in my 1116, August 16, 4 p.m. They do not feel position to express any views on the new demands set forth herein until they have received some indication from their governments of their attitude on the previous demands. The Danish Minister also desires to await the return to Shanghai from Japan of Great Northern representative, Poulsen.
5.
I recommend that I be authorized to proceed in the new situation in conformity with paragraphs 1 and 2 of Department’s 500, August 23, 4 p.m.

Repeated to Chungking, by mail to Peiping and Tokyo.

Lockhart
  1. None printed.↩